Have equity in your home? Want a lower payment? An appraisal from Craig Campbell: clc72703@gmail.com (479) 530-2433 can help you get rid of your PMI.A 20% down payment is typically accepted when getting a mortgage. Because the risk for the lender is often only the difference between the home value and the sum outstanding on the loan, the 20% provides a nice cushion against the expenses of foreclosure, reselling the home, and regular value fluctuations on the chance that a borrower doesn't pay.Lenders were taking down payments discounted to 10, 5 and frequently 0 percent in the peak of last decade's mortgage boom. How does a lender manage the additional risk of the small down payment? The solution is Private Mortgage Insurance or PMI. PMI takes care of the lender in case a borrower is unable to pay on the loan and the market price of the property is less than what the borrower still owes on the loan. Since the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and oftentimes isn't even tax deductible, PMI is pricey to a borrower. Unlike a piggyback loan where the lender absorbs all the costs, PMI is favorable for the lender because they secure the money, and they get paid if the borrower doesn't pay.
How can a buyer keep from bearing the cost of PMI?With the implementation of The Homeowners Protection Act of 1998, lenders are forced to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount on most loans. Savvy homeowners can get off the hook sooner than expected. The law states that, at the request of the home owner, the PMI must be dropped when the principal amount reaches just 80 percent.Considering it can take several years to get to the point where the principal is just 80% of the initial amount borrowed, it's important to know how your Arkansas home has appreciated in value. After all, any appreciation you've obtained over the years counts towards dismissing PMI. So why should you pay it after the balance of your loan has fallen below the 80% threshold? Your neighborhood might not adhere to national trends and/or your home could have gained equity before things simmered down. So even when nationwide trends forecast declining home values, you should realize that real estate is local. The toughest thing for many homeowners to figure out is whether their home equity has exceeded the 20% point. An accredited, Arkansas licensed real estate appraiser can surely help. It is an appraiser's job to recognize the market dynamics of their area. At Craig Campbell: clc72703@gmail.com (479) 530-2433, we're masters at recognizing value trends in Fayetteville, Washington County, and surrounding areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will generally do away with the PMI with little trouble. At which time, the home owner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: Cancellation of Private Mortgage Insurance: Federal Law May Save You Hundreds of Dollars Each Year
|
||||||||||||||||||
